Earnings bruise market: Why do experts say it may rise 20%?

It's a bitter start to the earnings season, as Infosys slightly wiped the smile off the bourses' face. Despite the Infosys shocker, the market as a whole put on a show of resilience for most of the session.

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Earnings bruise market: Why do experts say it may rise 20%?

It's a bitter start to the earnings season, as Infosys slightly wiped the smile off the bourses' face. Despite the Infosys shocker, the market as a whole put on a show of resilience for most of the session.

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Moneycontrol Bureau

It's a bitter start to the earnings season, as Infosysslightly wiped the smile off the bourses' face. Despite the Infosys shocker, the market as a whole put on a show of resilience for most of the session. However, global weakness triggered a late wave of selling that knocked more than a percent off both the Nifty and Sensex.

The BSE benchmark fell 1.37%, to close at 17,094.51 and the NSE benchmark slipped 69.40 points to 5,207.45.

Licking its wounds caused by Infosys dismal fourth quarter earnings, the market is looking for positive triggers by the Reserve Bank in its monetary policy review on April 17. According to economists, RBI may cut rates to boost economic growth.

Infact experts believe that though earnings may not provide impetus to the market, RBI’s rate cut may uplift sentiments. On a positive note, PN Vijay, Portfolio Manager is expecting the market may rise 20% in the next four to five months. "If you see in India in the last 4-5 bull and bear cycles the big trend reversal have happened with the rate cuts, these happened in early 2009, then late 2010 when the RBI started hardening the rates," he explains.

Jagdish Malkani, Member of NSE and BSE also agrees that the market is expecting the central bank to cut rates by 25 basis points (bps). Malkani is betting on FMCG and capital goods stocks like Siemens.

However, there are still many grey clouds overhanging the market. Sudarshan Sukhani of s2analytics.com points out that the market is making lower highs and a flat low bottom. "This bottom at 5150-5170 is not likely to hold. Short positions have been taken and inspite of the fact that we can see some more volatility the chances are that we’ll break," Sukhani adds.

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Infosys lost Rs 346.75 a share or 12.61%, to close at Rs 2,403.30 on the BSE today. Though the company managed to meet street expectations of its Q4 numbers, but FY13 EPS guidance was disappointing. Experts are concerned that the sector itself may see a re-rating now unless TCS meets Nasscom’s expectations.

Harit Shah, senior research analyst, Nirmal Bang Institutional Equities fells that Rs 165-166 is a more reasonable EPS target for Infosys in FY13. "Given the fact that they have taken an average of 50.88 as rupee rate for the year, they will definitely have to do that," he explains.

Harit Shah, senior research analyst Nirmal Bang Institutional Equities feels that Rs 165-166 is a more reasonable EPS target for Infosys in FY13. "Given the fact that they have taken an average of 50.88 as rupee rate for the year, they will definitely have to do that," he explains.